Big Island real estate agents are hopeful the housing market will stabilize in 2023 after sales slowed in 2022.
Last year saw the end of a boom in the Big Island housing market fueled in part by the COVID-19 pandemic. Buyers hoping to take advantage of low interest rates and pandemic work-from-home policies to buy a home in Hawaii were suddenly stymied when the U.S. Federal Reserve raised interest rates multiple times in 2022 to stave off inflation.
Consequently, 2022 ended with an 18% decline in single-family home sales on the Big Island compared to 2021, and a 23% decrease in the total dollar value of those sales.
All but one district on the island experienced a decrease in home sales between December 2022 and December 2021. The lone outlier was North Hilo, where sales were so minimal as to be statistically insignificant.
In South Hilo, 339 homes were sold in 2022, a slight decrease from the 394 sold in 2021, while in Puna, sales dropped as well, from 1,231 in 2021 to 1,125 in 2022.
On the other side of the island, sales in North Kona dropped more precipitously, with 466 sales in 2022, compared to 684 sales in 2021.
Despite the declines, the median sales price for a single-family home largely increased throughout Hawaii County.
The median sales price in Puna was $328,000 in December 2021, but rose to $355,000 in 2022. Similarly, North Kona prices rose from $1 million in 2021 to $1.1 million in 2022. In South Hilo, however, the median prices fell from $580,000 to $537,000.
Hilo Realtor Davin Padilla said the vigorous market during the pandemic was caused by a “perfect storm” of circumstances that likely won’t be seen again anytime soon. With interest rates at an average of around 4.5%, there are fewer buyers and homes are moving more slowly.
“There’s less demand, and less competition,” Padilla said. “A lot of the buyers who would have been in the market have been priced out. I haven’t heard from a lot of my clients who don’t have as much money at hand.”
But Padilla said properties are still moving in hubs like Hilo or Kailua-Kona. As of Jan. 5, there was about three months of available single-family residential inventory on the island, an increase from the height of the pandemic, when rapid turnaround meant there was little more than a month of inventory at a time.
“Things are still selling quickly if they’re priced appropriately,” said Jared Gates, broker-in-charge at Big Island Homes and Land. “We’re still seeing a fair bit of buyers. I think 2023 will still be a good year.”
Gates said the less frenetic pace of the market this year will allow buyers to take more time to vet purchases before making a decision.
He added that, even though the higher interest rates have made homes, on balance, less affordable, the reduced demand has required sellers to drop their prices from the peaks of the pandemic, when properties were selling so quickly that a seller could name their price.
That softening of prices, Gates said, will provide buyers more options and room for negotiation.
Ultimately, he said, he expects the market to come to resemble the slower, but still active, pace of 2018 and 2019 as the year progresses.
How soon that might happen, though, depends on how the Federal Reserve manages interest rates. According to a Friday report by the New York Times, some Federal Reserve officials have suggested further rate increases up to 5% this year.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.